Business Wire | Nov 9, 2021 04:06PM EST

Aris Water Solutions, Inc. Reports Third Quarter 2021 Financial and Operating Results

Nov. 09, 2021

HOUSTON--(BUSINESS WIRE)--Nov. 09, 2021--Aris Water Solutions, Inc. (NYSE: ARIS) ("Aris", "Aris Water" or the "Company"), today announced financial and operating results for the third quarter ended September 30, 2021.

THIRD QUARTER 2021 HIGHLIGHTS

* Record total water volumes and recycled water volumes of 961,000 barrels of water per day and 130,000 barrels of water per day respectively * Executed four new acreage dedications, increasing dedicated acres by 20,000 acres with a weighted-average contract length of ten years * Exceeded Aris's 2022 Sustainability Performance Target * Consolidated revenue of $59.5 million * Net loss of $20.7 million which includes a non-cash charge of $27.4 million associated with the abandonment of an asset * Consolidated Adjusted EBITDA1 of $30.8 million * Cash flow from Operating Activities of $26.5 million * Free cash flow of $6.1 million2

"The third quarter of 2021 featured continued strong performance for Aris Water as we set records in total volumes handled and produced water volumes recycled. We improved our percentage of sourced water recycled to 61%, exceeding our 2022 Sustainability Performance Target and demonstrating our commitment to water stewardship by reducing groundwater extraction. Our strong, long-term partnerships with our blue-chip customers provide both stability and significant upside as activity levels continue to improve," stated Amanda Brock, Chief Executive Officer of Aris Water.

"This is an exciting time for the Company and our industry. We are seeing steady growth from our customers across both the Delaware and Midland Basins, supporting a positive outlook moving forward. We have a unique offering that provides our customers with a proven, reliable water infrastructure partner and helps them reduce the use of groundwater," stated Bill Zartler, Founder and Executive Chairman of Aris Water.

____________________^1 Adjusted EBITDA is a non-GAAP financial measure. See the supplementaryschedules in this press release for a discussion of how we define and calculateAdjusted EBITDA and a reconciliation thereof to net income, the most closelycomparable GAAP measure.

^2 Free cash flow is a is a non-GAAP financial measure. See the supplementaryschedules in this press release for a discussion of how we define and calculatefree cash flow and a reconciliation thereof to net cash from operatingactivities, the most closely comparable GAAP measure.

OPERATIONS AND FINANCIAL UPDATE

During the third quarter of 2021, the Company recorded a consolidated net loss of $20.7 million. The consolidated net loss includes a non-cash charge of $27.4 million associated with the abandonment of an asset. Excluding the non-cash charge, consolidated net income was $6.7 million in the third quarter of 2021 compared to consolidated net income of $1.1 million for the third quarter of 2020.

During the third quarter of 2021, the Company averaged 961,000 barrels of water per day of total volumes handled, sold and transferred, an increase of 42% compared to the third quarter of 2020. Our volume growth was driven by the increased activity levels of our long-term contracted customers. The Company had Adjusted EBITDA1 of $30.8 million for the third quarter of 2021 compared to $19.7 million in the third quarter of 2020, an increase of 56%.

During the third quarter of 2021, the Company executed four new long-term acreage dedications covering approximately 20,000 dedicated acres, with a weighted average life of approximately 10 years. Two of these contracts include long term full-cycle handling and recycling solutions.

Third quarter 2021 cash capital expenditures totaled $20.4 million compared to $29.3 million in the third quarter of 2020, a decrease of 30%. We continue to invest in high-return capital projects that support our long-term contracted customers and leverage our existing infrastructure. Free cash flow was $6.1 million for the third quarter of 2021. As of September 30, 2021, the Company had approximately $36.4 million in cash and an undrawn and available $200.0 million revolving credit facility. Additionally, the Company received net proceeds of approximately $32.8 million in October from its recent initial public offering.

The following table summarizes the Company's volumes on its operated assets:

Three Months Ended Nine Months Ended September 30, September 30,

2021 2020 2021 2020

Produced Water Handling Volumes (MBbl/d) 708 574 692 566

Total Water Solutions Volumes (MBbl/d) 253 101 205 103

Total Volumes (MBbl/d) 961 675 897 669

CONFERENCE CALL

Aris will host a conference call and webcast for investors and analysts to discuss its results for the third quarter of 2021 on Wednesday, November 10, 2021 at 8:00 a.m. Central Time (9:00 a.m. Eastern Time). Participants should call (888) 437-3179 (United States/Canada) or (862) 298-0702 (International) and should refer to Aris Water Solutions, Inc. when dialing in. A telephonic replay will be available from 11/10/2021 to 11/24/2021. To access the replay, call (877) 660-6853 (United States/Canada) or (201) 612-7415 (International) and enter confirmation code 13724848. A live broadcast of the earnings conference call will also be available via the internet at www.ariswater.com under the "Investors" section of the site. A replay will also be available on the website following the call.

About Aris Water Solutions, Inc.

Aris Water Solutions, Inc. is a leading, growth-oriented environmental infrastructure and solutions company that directly helps its customers reduce their water and carbon footprints. Aris Water delivers full-cycle water handling and recycling solutions that increase the sustainability of energy company operations. Its integrated pipelines and related infrastructure create long-term value by delivering high-capacity, comprehensive produced water management, recycling and supply solutions to operators in the core areas of the Permian Basin.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Examples of forward-looking statements include, but are not limited to, those regarding our business strategy, our industry, our future profitability, the various risks and uncertainties associated with the extraordinary market environment and impacts resulting from the volatility in global oil markets and the COVID-19 pandemic, expected capital expenditures and the impact of such expenditures on performance, management changes, current and potential future long-term contracts and our future business and financial performance. In some cases, you can identify forward-looking statements by terminology such as "anticipate," "guidance," "preliminary," "project," "estimate," "expect," "continue," "intend," "plan," "believe," "forecast," "future," "potential," "may," "possible," "could" and variations of such words or similar expressions. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include, but are not limited to the risk factors discussed or referenced in our filings made from time to time with the SEC. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Solaris Midstream Holdings, LLC and Subsidiaries

Condensed Consolidated Statements of Operations

(unaudited)

Three Months Ended Nine Months Ended

(in thousands) September 30, September 30,

2021 2020 2021 2020

RevenueProduced Water Handling $ 24,639 $ 23,323 $ 71,368 $ 70,382

Produced Water 23,135 13,312 62,216 35,284 Handling-AffiliatesWater Solutions 7,666 1,149 11,824 10,410

Water 4,059 4,672 16,864 10,472 Solutions-AffiliatesTotal Revenue 59,499 42,456 162,272 126,548

Cost of RevenueDirect Operating Costs 23,497 22,207 66,703 71,640

Depreciation, 15,378 11,751 45,550 31,529 Amortization andAccretionTotal Cost of Revenue 38,875 33,958 112,253 103,169

Operating Costs andExpensesAbandoned Well Costs 27,402 - 27,402 -

General and 5,228 4,773 15,240 13,421 AdministrativeOther Operating Expenses 940 555 2,590 4,854

Total Operating Expenses 33,570 5,328 45,232 18,275

Operating (Loss) Income (12,946 ) 3,170 4,787 5,104

Other ExpenseInterest Expense, Net 7,880 2,099 17,855 5,364

Loss on Debt Modification - - 380 -

Total Other Expense 7,880 2,099 18,235 5,364

(Loss) Income Before (20,826 ) 1,071 (13,448 ) (260 )TaxesIncome Tax Expense (83 ) 9 (81 ) 15 (Benefit)Net (Loss) Income $ (20,743 ) $ 1,062 $ (13,367 ) $ (275 )

Equity Accretion andDividend Related to - (1,511 ) 21 (1,928 )Redeemable PreferredUnitsNet Loss Attributable to $ (20,743 ) $ (449 ) $ (13,346 ) $ (2,203 )Members' EquitySolaris Midstream Holdings, LLC and Subsidiaries

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands, except units) September 30, December 31, 2021 2020

AssetsCash and Cash Equivalents $ 36,389 $ 24,932

Accounts Receivable, Net 32,576 21,561

Accounts Receivable from Affiliate 21,584 11,538

Other Receivables 3,649 3,722

Prepaids, Deposits and Other Current Assets 1,349 4,315

Total Current Assets 95,547 66,068

Fixed AssetsProperty, Plant and Equipment 692,231 661,446

Accumulated Depreciation (60,757 ) (43,258 )

Total Property, Plant and Equipment, Net 631,474 618,188

Intangible Assets, Net 313,081 337,535

Goodwill 34,585 34,585

Other Assets 2,848 1,429

Total Assets $ 1,077,535 $ 1,057,805

Liabilities, Mezzanine and Members' EquityAccounts Payable $ 10,067 $ 16,067

Payables to Affiliate 1,169 1,884

Accrued and Other Current Liabilities 46,774 27,838

Total Current Liabilities 58,010 45,789

Deferred Revenue and Other Long-Term Liabilities 1,336 1,432

Long-Term Debt, Net of Debt Issuance Costs 391,583 297,000

Asset Retirement Obligation 6,032 5,291

Total Liabilities 456,961 349,512

Commitments and ContingenciesMezzanine Equity:Redeemable Preferred Units, $10,000 par value,none issued or outstanding as of September 30, - 74,378 2021 and 7,307 outstanding as of December 31,2020Members' Equity:Class A units, $10 par value, 27,797,658 and 308,638 318,394 27,797,207 issued and outstanding as of September30, 2021 and December 31, 2020, respectivelyClass B units, $10 par value, 3,556,051 issued 35,773 37,023 and outstanding as of September 30, 2021 andDecember 31, 2020Class C units, $0 par value, 878,850 and 806,350 - - issued and outstanding as of September 30, 2021and December 31, 2020, respectivelyClass D units, $10 par value, 6,651,100 issued 276,163 278,498 and outstanding as of September 30, 2021 andDecember 31, 2020Total Members' Equity 620,574 633,915

Total Liabilities, Mezzanine and Members' Equity $ 1,077,535 $ 1,057,805

Solaris Midstream Holdings, LLC and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)Nine Months Ended September 30,2021

2020

Cash Flow from Operating ActivitiesNet Loss$(13,367

)

$(275

)

Adjustments to reconcile Net Loss to Net Cash provided by Operating ActivitiesDepreciation, Amortization and Accretion45,550

31,529

Abandoned Well Costs27,402

-

Loss on Disposal of Asset, Net225

82

Abandoned Projects2,035

1,501

Amortization of Deferred Financing Costs1,320

570

Loss on Debt Modification380

-

Bad Debt Expense216

83

Changes in operating assets and liabilities:Accounts Receivable(11,231

)

9,387

Accounts Receivable from Affiliate(10,046

)

2,475

Other Receivables231

56

Prepaids, Deposits and Other Current Assets2,516

1,522

Accounts Payable(3,284

)

1,793

Payables to Affiliate(715

)

390

Adjustment in Deferred Revenue(46

)

975

Accrued Liabilities and Other16,000

462

Net Cash Provided by Operating Activities57,186

50,550

Cash Flow from Investing ActivitiesProperty, Plant and Equipment Expenditures(62,728

)

(121,835

)

Net Cash Used in Investing Activities(62,728

)

(121,835

)

Cash Flow from Financing ActivitiesProceeds from Senior-Sustainability Linked Notes400,000

-

Payments for Initial Public Offering Costs(855

)

-

Payments of Financing Costs Related to Issuance of Senior- Sustainability Linked Notes(9,352

)

-

Repayment of Credit Facility(297,000

)

-

Proceeds from Credit Facility-

73,000

Redemption of Redeemable Preferred Units(74,357

)

-

Payments of Financing Costs related to Credit Facility(1,442

)

(491

)

Members' Contributions5

-

Net Cash Provided by Financing Activities16,999

72,509

Net Increase in Cash and Cash Equivalents11,457

1,224

Cash and Cash Equivalents, Beginning of Period24,932

7,083

Cash and Cash Equivalents, End of Period$36,389

$8,307

Use of Non-GAAP Financial Information

We use financial measures that are not calculated in accordance with U.S. generally accepted accounting principles ("GAAP"), including Adjusted EBITDA, free cash flow, Adjusted Operating Margin and Adjusted Operating Margin per Barrel. Although these Non-GAAP financial measures are important factors in assessing our operating results and cash flows, they should not be considered in isolation or as a substitute for net income or gross margin or any other measures prepared under GAAP.

Reconciliation of GAAP "Net income" to Non-GAAP "Adjusted EBITDA" - We calculate Adjusted EBITDA as net income (loss) plus: interest expense; income taxes; depreciation, amortization and accretion expense; asset impairment and abandoned project charges; losses on the sale of assets; loss on debt modification; and non-recurring or unusual expenses or charges (including temporary power costs), less any gains on sale of assets.

Reconciliation of GAAP "Cash Flow from Operating Activities" to Non-GAAP "Free Cash Flow" - We calculate free cash flow as cash flow from operating activities adjusted to exclude cash spent on property, plant and equipment.

Reconciliation of GAAP "Gross Margin" to Non-GAAP "Adjusted Operating Margin" and "Adjusted Operating Margin per Barrel" - We calculate Adjusted Operating Margin as Gross Margin plus depreciation, amortization and accretion and temporary power costs. We define Adjusted Operating Margin per Barrel as Adjusted Operating Margin divided by total volumes.

We believe this presentation is used by investors and professional research analysts for the valuation, comparison, rating, and investment recommendations of companies within our industry. Additionally, we use this information for comparative purposes within our industry. Adjusted EBITDA, Adjusted Operating Margin and Adjusted Operating Margin per Barrel are not measures of financial performance under GAAP and should not be considered as measures of liquidity or as alternatives to net income (loss) or gross margin. Adjusted EBITDA, free cash flow, Adjusted Operating Margin and Adjusted Operating Margin per Barrel as defined by us may not be comparable to similarly titled measures used by other companies and should be considered in conjunction with net income (loss) and other measures prepared in accordance with GAAP, such as gross margin, operating income or cash flows from operating activities.

Solaris Midstream Holdings, LLC and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands) Nine Months Ended September 30, 2021 2020

Cash Flow from Operating ActivitiesNet Loss $ (13,367 ) $ (275 )

Adjustments to reconcile Net Loss to Net Cashprovided by Operating ActivitiesDepreciation, Amortization and Accretion 45,550 31,529

Abandoned Well Costs 27,402 -

Loss on Disposal of Asset, Net 225 82

Abandoned Projects 2,035 1,501

Amortization of Deferred Financing Costs 1,320 570

Loss on Debt Modification 380 -

Bad Debt Expense 216 83

Changes in operating assets and liabilities:Accounts Receivable (11,231 ) 9,387

Accounts Receivable from Affiliate (10,046 ) 2,475

Other Receivables 231 56

Prepaids, Deposits and Other Current Assets 2,516 1,522

Accounts Payable (3,284 ) 1,793

Payables to Affiliate (715 ) 390

Adjustment in Deferred Revenue (46 ) 975

Accrued Liabilities and Other 16,000 462

Net Cash Provided by Operating Activities 57,186 50,550

Cash Flow from Investing ActivitiesProperty, Plant and Equipment Expenditures (62,728 ) (121,835 )

Net Cash Used in Investing Activities (62,728 ) (121,835 )

Cash Flow from Financing ActivitiesProceeds from Senior-Sustainability Linked Notes 400,000 -

Payments for Initial Public Offering Costs (855 ) -

Payments of Financing Costs Related to Issuance of (9,352 ) - Senior- Sustainability Linked NotesRepayment of Credit Facility (297,000 ) -

Proceeds from Credit Facility - 73,000

Redemption of Redeemable Preferred Units (74,357 ) -

Payments of Financing Costs related to Credit (1,442 ) (491 )FacilityMembers' Contributions 5 -

Net Cash Provided by Financing Activities 16,999 72,509

Net Increase in Cash and Cash Equivalents 11,457 1,224

Cash and Cash Equivalents, Beginning of Period 24,932 7,083

Cash and Cash Equivalents, End of Period $ 36,389 $ 8,307

Use of Non-GAAP Financial Information

We use financial measures that are not calculated in accordance with U.S. generally accepted accounting principles ("GAAP"), including Adjusted EBITDA, free cash flow, Adjusted Operating Margin and Adjusted Operating Margin per Barrel. Although these Non-GAAP financial measures are important factors in assessing our operating results and cash flows, they should not be considered in isolation or as a substitute for net income or gross margin or any other measures prepared under GAAP.

Reconciliation of GAAP "Net income" to Non-GAAP "Adjusted EBITDA" - We calculate Adjusted EBITDA as net income (loss) plus: interest expense; income taxes; depreciation, amortization and accretion expense; asset impairment and abandoned project charges; losses on the sale of assets; loss on debt modification; and non-recurring or unusual expenses or charges (including temporary power costs), less any gains on sale of assets.

Reconciliation of GAAP "Cash Flow from Operating Activities" to Non-GAAP "Free Cash Flow" - We calculate free cash flow as cash flow from operating activities adjusted to exclude cash spent on property, plant and equipment.

Reconciliation of GAAP "Gross Margin" to Non-GAAP "Adjusted Operating Margin" and "Adjusted Operating Margin per Barrel" - We calculate Adjusted Operating Margin as Gross Margin plus depreciation, amortization and accretion and temporary power costs. We define Adjusted Operating Margin per Barrel as Adjusted Operating Margin divided by total volumes.

We believe this presentation is used by investors and professional research analysts for the valuation, comparison, rating, and investment recommendations of companies within our industry. Additionally, we use this information for comparative purposes within our industry. Adjusted EBITDA, Adjusted Operating Margin and Adjusted Operating Margin per Barrel are not measures of financial performance under GAAP and should not be considered as measures of liquidity or as alternatives to net income (loss) or gross margin. Adjusted EBITDA, free cash flow, Adjusted Operating Margin and Adjusted Operating Margin per Barrel as defined by us may not be comparable to similarly titled measures used by other companies and should be considered in conjunction with net income (loss) and other measures prepared in accordance with GAAP, such as gross margin, operating income or cash flows from operating activities.

Solaris Midstream Holdings, LLC and Subsidiaries

Operating Metrics and Non-GAAP Reconciliation

(unaudited)

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

Thousands barrel waterper dayProduced Water Handling 708 574 692 566 VolumesWater SolutionsVolumes:Recycled Produced Water 130 44 102 34 Volumes SoldGroundwater Volumes 82 45 61 58 SoldGroundwater Volumes 41 12 42 11 TransferredTotal Water Solutions 253 101 205 103 VolumesTotal Volumes 961 675 897 669

Per Barrel OperatingMetricsProduced Water Handling $ 0.73 $ 0.69 $ 0.71 $ 0.68 Revenue/BarrelWater Solutions Revenue $ 0.50 $ 0.63 $ 0.51 $ 0.74 /BarrelRevenue/Barrel of Total $ 0.67 $ 0.68 $ 0.66 $ 0.69 VolumesDirect Operating $ 0.27 $ 0.36 $ 0.27 $ 0.39 Expense/BarrelAdjusted Operating $ 0.41 $ 0.38 $ 0.41 $ 0.37 Margin/Barrel ^(1) Cash Flow from $ 26,496 $ 9,639 $ 57,186 $ 50,550 Operating ActivitiesLess: Cash Paid for (20,375 ) (29,254 ) (62,728 ) (121,835 )Property, Plant andEquipmentFree Cash Flow $ 6,121 $ (19,615 ) $ (5,542 ) $ (71,285 )

Net Income (Loss)$(20,743

)

$1,062

$(13,367

)

$(275

)

Interest Expense, Net7,880

2,099

17,855

5,364

Income Tax (Benefit) Expense(83

)

9

(81

)

15

Depreciation, Amortization and Accretion15,378

11,751

45,550

31,529

Abandoned Well Costs27,402

-

27,402

-

Abandoned Projects679

368

2,035

1,501

Temporary Power Costs-

3,548

4,253

12,669

Loss on Disposal of Asset, Net8

15

225

82

Loss on Debt Modification-

-

380

-

Settled Litigation-

714

-

1,311

Transaction Costs253

172

330

3,271

Severance and Other-

-

221

190

Adjusted EBITDA$30,774

$19,738

$84,803

$55,657

Total Revenue$59,499

$42,456

$162,272

$126,548

Cost of Revenue(38,875

)

(33,958

)

(112,253

)

(103,169

)

Gross Margin20,624

8,498

50,019

23,379

Depreciation, Amortization and Accretion15,378

11,751

45,550

31,529

Temporary Power Costs-

3,548

4,253

12,669

Adjusted Operating Margin$36,002

$23,797

$99,822

$67,577

Total Volumes (Thousands of BBLs)88,357

62,103

245,048

183,438

Adjusted Operating Margin/BBL$0.41

$0.38

$0.41

$0.37

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CONTACT: David Tuerff IR@ariswater.com